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Sun 21 Nov 2010 10:56 AM

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Drilling for profits

From Iraq to Yemen, Oil giant Total's Arnaud Breuillac has his work cut out

Drilling for profits
Breuillac’s task is to make sure Total keeps winning the big contracts to ensure it holds its position.

Arnaud Breuillac, total’s most senior executive in the Middle East, meets Arabian Business in his company’s chalet at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), seemingly without a care in the world. He has only been in his current job – Regional Senior Vice President for Exploration and Production - since July 1st, but he is well experienced in what it takes to work in the Middle East and the way which business is conducted here. Besides, to hear him tell it, the oil industry in the Gulf is in as rude, if not ruder, health than ever it has been before.

He says: “I started my career working in Abu Dhabi, 27 years ago, working for Total in partnership with ADNOC as a young process engineer. And then I came back in the Middle East from 2004 to 2006, looking after our Iranian projects. I was based in Paris, but we had many Iranian projects at the time.”

Total’s involvement in the projects in Iran — of which Breuillac says he has fond memories — might have stopped now, due to the international sanctions against the country, but the company’s operations in the other parts of the region are very much ongoing. In fact, Breuillac says he is extremely busy, and happy to be, as Total plans for projects which will not come on-stream for another four or five years. He says the financial crisis has not affected Total too badly.

He says: “Our industry is such that projects that are decided upon span over many years, so the fact that you have a crisis is not necessarily going to have an immediate effect on projects sanctioned and so on. The projects we sanctioned today will be for production of oil or gas four or five years from now.

“Very soon with the growth coming from the emerging countries, particularly in Asia, the need for oil and gas will pick up. And even if today the gas is slightly oversupplied, that will not last. So everybody is expecting the demand to grow.”

In the last few years, as tight credit has seen investment dry up across most sectors, the oil industry, particularly in this part of the world, has kicked on. Total has made major investments in Qatar and Yemen, to name only two.

“As far as Total is concerned, we have not trimmed our investment budget. From 2005 to 2011 we have maintained our investment budget — in fact it has increased. GCC is a fraction of that, it represent 20-25 percent. And we have just started two major projects in the Middle East, one in Qatar and one in Yemen. Both are energy projects, both were launched four to five years ago. Both have come online. One is Qatar Gas II. Even more special is Yemen LNG, which has come on stream this year,” he says.

Asked if Total had a hard time constructing such a massive project in Yemen, which is widely regarded as a politically unstable country, Breuillac says the opposite was the case. The very size of the undertaking meant the company received all the necessary assistance it needed from the government there.

He says: “Actually the location of the plot is in south Yemen. It is such that the logistics were mainly by sea, and the area is barely populated. Any project of that size is a challenge in itself. There was nothing specifically more difficult about it being in Yemen.

“What is true is that this was the largest industrial project ever done in Yemen, so I think we got relatively good attention from the government and the authorities, so that a lot of the administrative burden was maybe facilitated because this project was so important to them.”

Total is not a French company, although rather in the same way that BP is considered a British one in the popular imagination, it is certainly thought to be at least seven parts French by the man in the street. In the Gulf recently, such an association could have been beneficial — Gulf-France trade links have been conspicuously strengthened over the last half decade.

French President Nicolas Sarkozy has even visited the region expressly to throw his weight behind the closening of ties. Does Breuillac think the Gulf and France are developing a relationship that could be considered special, in the way that Britain’s relationship with America is deemed to be?

He shakes his head, amused at the idea.

“I don’t think there is anything really special, but at the same time they do value the relationship with France and with Total, as a company that has been here for so long. Total is the largest company in France. Total is not French, it is an international company with a head office and a lot of assets in France. But it is quite normal that there is an association.

“There is an origin: part of Total’s history is in France. But I would be tempted to say part of Total’s history is in the Middle East.

“Total was born in the Middle East in 1924 after the WWI…. It is clear that when the dynamics of geopolitics is good between countries, it kind of brings more connections and energy matters.”

While being French might be of benefit in much of the Gulf, there was a time when it was felt it would be a handicap when it came to getting access to the oil riches of Iraq, following the Gulf war. France did not take part in that war militarily, and it was rumoured as a consequence that French-associated companies would not be invited to the party when it came to drilling oil once the war was over. Breuillac says it has not turned out that way.

He says: “It didn’t happen. There was objectively no reason. The reality is it was done in a fair way. They said if you have the industrial capability, then nationality does not matter. It was done in such a transparent way, no one can argue there was any bias.”

Anyway, by the sounds of it, it was not up to the Americans who won drilling concessions and who did not.

Breuillac says: “All the contracts have been managed by the Ministry of Oil. They would qualify the companies purely based on reference capabilities to have done a similar job elsewhere in the world… You can see from the bid results, only two American companies have won contracts, Exxon Mobil and Occidental. Conoco and Chevron did not get any contract at all.”

Total has so far been awarded one contract in Iraq — to operate the Halfaya oil field in conjunction with China’s CNPC and Malaysia’s Petronas. He says: “The Iraq bid mechanism is essentially quite simple — there are two numbers put in an envelope, production plateau and fee. We do not consider this to be the optimum way to manage long term sustainability, however, we do recognise that Iraq needs to reconstruct their oil and gas industry quickly, so this was probably the best way to achieve that.

“Because, clearly, it got the companies to be motivated by getting to a certain level of production quickly. We think that those contracts will be executed exactly as they are awarded, there will be no revisions.”

Currently some 30 percent of the world’s oil comes from the Middle East, but the region has 50 percent of the known reserves. Logically, as time passes, the Middle East will become more and more important for energy. Breuillac, then, as the most senior proponent of Total in the region, has a big job on his hands. Total is already, with Shell and Exxon, one of the biggest three oil and gas players in the Middle East. His task is to make sure the company keeps winning the big contracts to ensure it holds its position. Clearly, it is a challenge he relishes.

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